New Delhi, Feb. 12 Export segments that have recorded robust recovery from the global financial crisis would lose some stimulus benefits from the next financial year.
On the expenditure side, the Government is looking to do away with interest subsidy for these sectors besides reducing duty drawback benefits in a phased manner. In addition, on the revenue side, these sectors may have to pay higher excise duties and service tax. But SMEs (small and medium enterprises) in the manufacturing sectors would be spared the export stimulus withdrawal in the next fiscal. These measures are expected to be announced in the Budget as part of the Government's move to bring down the fiscal deficit, official sources told Business Line.
Export sectors that have done well include gems and jewellery, basmati rice, marine, man-made fibres, tobacco, fruits and vegetables, tea, coffee, cashew, drugs and pharmaceuticals, plastics and petroleum. Sectors still doing badly include engineering, textile, jute manufacturing, carpets, handicrafts and leather.
Struggling sectors
The interest subsidy could be extended till March 31, 2011 for struggling sectors such as carpets, handicrafts, textile and leather. But sectors doing well like marine, gems and jewellery may not get this extension. The 2 per cent interest subvention ends on March 31, 2010.
In the stimulus measures, excise duty was cut from 14 per cent to 8 per cent. But the sectors faring well may have to pay an excise duty of 10-12 per cent in 2010-11. The Government may leave the excise duty at 8 per cent for sectors in the red.
Also, service tax could be hiked from 10 per cent to 12 per cent or more for export sectors showing recovery. In the stimulus package, service tax was reduced from 12 per cent to 10 per cent.
Mr A. Sakthivel, President, Federation of Indian Export Organisations, said, “Before withdrawing benefits, the Government must compare exports for sectors in 2009-10 with the 2007-08 figures instead of doing so with the low base of 2008-09. Even without tinkering with the duty drawback and DEPB (duty entitlement passbook scheme) rates, substantial saving will accrue to the Government due to appreciation of the rupee as these benefits are given on the basis of exports value in rupees.”
The tax-GDP ratio has fallen and the Government is under pressure to contain its fiscal deficit at 5.5 per cent of GDP by the next fiscal-end from the current 6.8 per cent. The Government is looking to raise revenue, while curtailing expenditure to do this.
Source : Business Line